Love them or hate them, payroll taxes are a mandatory responsibility for employers and employees. In fact, they’re kind of a big deal.

Employers are required to deduct taxes from employee paychecks, match certain amounts, and pay other stipends as well. While it sounds fairly formulaic, when you consider shifting deadlines and complex calculations, payroll taxes can feel like a never-ending puzzle.

And here’s the kicker: One missed deadline or misstep could cost your business exponentially, leading to major financial consequences.  

But don’t stress! Staying on top of payroll tax deadlines doesn’t have to be a headache. We’ve written this article to help you navigate the who, what, and when of payroll tax filing and payments. From quarterly Form 941 deadlines to monthly deposit schedules, we’ll walk you through everything you need to know to file your taxes for 2024 and beyond.

Let us take the complexity out of the equation so you can focus on what matters most — efficiently and effectively running your business!

What Exactly Are Payroll Taxes?

Payroll taxes are the essential funding source of all government programs. These taxes — mandated by federal, state, and local authorities — are calculated as a percentage of an employee's wages and support programs, like Social Security, Medicare, and unemployment insurance.

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Types of Payroll Taxes

The fundamental components of payroll taxes include federal income tax, Social Security and Medicare taxes, and federal unemployment tax. Let’s provide some context into each: 

Federal Income Tax 

Federal income tax is a tax levied by the U.S. government on the earnings of individuals, corporations, trusts, and other entities. For employees, this tax is typically collected through a withholding process, where employers deduct a portion of their wages and submit it directly to the Internal Revenue Service (IRS).

Federal income tax applies to various forms of income, including wages, salaries, bonuses, tips, commissions, investment income, and certain types of unearned income. It’s calculated using a progressive tax system, meaning the more you earn, the higher the percentage you pay on the next “layer” of income.

The tax rates are organized into seven brackets, ranging from 10%-37% for the 2024 and 2025 tax years. However, moving to a higher tax bracket doesn’t mean paying that rate on all your income — only on the portion that falls within the new bracket.

Employers are responsible for withholding the appropriate amount from each paycheck and submitting these payments according to IRS schedules. Unlike Medicare or Social Security taxes, which are calculated using flat rates, federal income tax withholding involves a more nuanced, multilayered calculation process.

Social Security and Medicare Taxes 

Social Security and Medicare taxes, also known as Federal Insurance Contributions Act (FICA) taxes, are a cornerstone of the U.S. payroll tax system. These taxes are jointly funded by employers and employees to support vital government programs like retirement, disability, and health insurance. Paying FICA taxes helps employees build eligibility for Social Security benefits, including retirement income starting as early as age 62, disability benefits, and survivors’ insurance. Medicare taxes, meanwhile, fund hospital insurance benefits available to individuals age 65 and older.

The total FICA tax rate is 15.3% of an employee’s wages, divided evenly between the employer (7.65%) and the employee (7.65%). Here’s a table that offers a summary, followed by some additional context. 

Social Security Tax (OASDI)

• Rate: 6.2% each for the employer and employee (12.4% total); and
• Wage Base Limit: Applies only to wages up to $176,100 in 2025. Once an employee’s wages exceed this limit, no further Social Security taxes are withheld or paid for the year.

Medicare Tax (Hospital Insurance)

• Rate: 1.45% each for the employer and employee (2.9% total); and
• No Wage Base Limit: Medicare taxes apply to all wages, regardless of amount.

Additional Medicare Tax

• Rate: 0.9%, paid solely by employees on wages exceeding $200,000 annually (or $250,000 for married individuals filing jointly).
• Thresholds: Employers are required to withhold this additional tax starting the pay period when an employee’s wages surpass $200,000, regardless of filing status.

Federal Unemployment Tax

Federal unemployment taxes (FUTA) are an employer-only payroll tax that helps fund unemployment compensation programs that support workers who lose their jobs through no fault of their own.

Unlike Social Security and Medicare taxes, which are shared by employers and employees, FUTA taxes are paid entirely by employers. Employees do not see deductions for FUTA taxes on their paychecks.

2024 Tax Rate and Wage Base Limit

• Rate: The FUTA tax rate is 6%; and
• Wage Base Limit: Employers only pay FUTA taxes on the first $7,000 of each employee’s wages. Wages beyond this limit are not taxed under FUTA.

Tax Credits

Employers in non-credit reduction states (i.e., most states) can claim a tax credit of up to 5.4%, reducing the effective FUTA rate to 0.6%. This means the maximum amount of FUTA tax per employee is just $42 annually (0.6% x $7,000).

State Unemployment Taxes (SUTA)

Most states require employers to pay their own state unemployment insurance (SUI) taxes. These state-level taxes work in conjunction with FUTA to fund unemployment benefits.

What Does FUTA Fund?

FUTA taxes are part of a collaborative effort with state unemployment tax systems to provide temporary financial support to individuals who lose their jobs. This funding helps cover the costs of state unemployment benefit payments for eligible workers and the administration of unemployment insurance programs at both state and federal levels.

Employer Requirements

You must pay FUTA taxes annually if your business:

• Paid at least $1,500 in wages during any calendar quarter; and
• Employed one or more workers for at least part of a day in 20 or more weeks in a calendar year. 

Payroll Tax Due Dates

Employers must remit payroll taxes to the government on a timely basis with deadlines varying depending on the tax type, filing frequency, and employer size. Here’s a breakdown of key requirements and dates:

Federal Income and FICA Taxes

Employers must deposit federal income tax withholding, Social Security, and Medicare taxes according to their assigned deposit schedule — monthly or semiweekly.

Monthly Depositors: Payments for a given month are due by the 15th of the following month.

Semiweekly Depositors: Taxes for wages paid on Wednesday through Friday are due the following Wednesday. Taxes for wages paid on Saturday through Tuesday are due the following Friday.

Next-Day Deposit Rule: Employers accumulating $100,000 or more in tax liability on any day must deposit the amount by the next business day.

Unemployment Taxes 

FUTA deposits are generally due quarterly unless the total tax is $500 or less. In that case, the employer may carry the amount forward to the next quarter. Employers with an annual FUTA tax liability of less than $500 can pay it along with filing Form 940 by Jan. 31 of the following year.

Quarterly Reporting Deadlines

Documents, such as Form 941, which reports wages paid and employment taxes withheld, are due quarterly on April 30 (Q1), July 31 (Q2), October 31 (Q3), and January 31 (Q4). Employers who deposit all taxes in a timely manner may have an additional 10 calendar days to file.

Annual Reporting Deadlines

Several payroll-related filings are due by Jan. 31:

Form 940: An employer’s annual federal unemployment tax return.

Forms W-2 and W-3: Reporting employee wages and taxes to the SSA and providing copies to employees.

Form 1099-NEC: Reporting payments made to nonemployees, such as independent contractors.

Form 944: Used by certain small businesses in lieu of Form 941.

Form 943: Reporting wages for agricultural employees.

Electronic Filing and Payment

All federal tax deposits must be made via the Electronic Federal Tax Payment System (EFTPS). The IRS requires most forms to be filed electronically, especially for businesses with 10 or more returns.

Adhering to these deadlines helps avoid penalties and ensures smooth payroll operations. Employers should consult IRS resources like Publication 15 for detailed guidance.

Unlike FICA, FUTA is paid entirely by employers to fund unemployment benefits.

Penalties for Late Tax Deposits

Failure to deposit payroll taxes on time can result in penalties based on how late the deposit is. The longer the delay, the higher the penalty.

Note: These penalties are not cumulative. For example, a deposit that’s 20 days late incurs a 10% penalty, not 2% + 5% + 10%. Additionally, interest is charged on overdue deposits, increasing the amount owed until fully paid. Employers who miss deadlines may apply for a payment plan to reduce penalties.

Penalties may be reduced or removed if the employer can demonstrate reasonable cause for the delay or qualify for first-time penalty abatement (FTA). However, interest on penalties is generally not eligible for reduction. To avoid these penalties, employers should stay aware of their tax deposit schedules and use electronic funds transfers to ensure timely deposits. If you’ve missed a payment deadline, make the deposit as soon as possible to minimize the penalty.

Maintaining Payroll Records

Maintaining accurate payroll tax records is essential for compliance with federal, state, and local tax laws. To ensure your records are well-organized, store essential employee details, like Social Security numbers, tax withholding elections, and any supporting documents (e.g., Form W-4). Track hours worked, pay rates, bonuses, deductions, and leave balances, and retain copies of all tax filings, such as Form 941, Form 940, W-2 forms, and state/local tax filings. Also, document both pre- and post-tax deductions, ensuring they are properly handled for tax purposes.

It’s important to keep records for the required period: at least four years for federal tax returns and employee records for at least three years after employment ends. Regularly review payroll tax calculations to ensure accuracy and compliance with current tax rates and employee elections. Digital tools, like payroll software and secure cloud storage, can automate calculations, generate reports, and improve data accessibility while reducing errors. Additionally, conduct regular audits and reconcile payroll accounts to ensure taxes are being withheld and paid correctly.

Stay updated on tax law changes and implement strong security measures to protect sensitive payroll data. Respond promptly to IRS notices and keep documentation for audits, such as timecards and employee contracts, to support compliance. By following these best practices, you can reduce the risk of errors, audits, and penalties, ensuring your payroll tax records remain accurate and compliant.

With the Proper Software, Payroll Taxes Are a Breeze

Managing payroll taxes doesn’t have to be overwhelming. With OnTheClock, you can automate calculations, securely store records, and receive timely tax filing reminders — all in one place.

Don’t let tax deadlines and penalties stress you out. Start your free trial today and experience how OnTheClock can simplify your payroll process, or contact us for a personalized demo and see how we can help you stay compliant and save time.

Get started now — your business will thank you later!